Farmington Hills Real Estate and Events talk Michigan

An open letter to David Stevens  Assistant Secretary of Housing - FHA Commissioner,

 David,

I hate to say it, but you have opened the floodgates or pandoras box.  So I might as well be the first to do it.  I am one of those guys that stands up and says what I feel.  Here are my thoughts on what the reduction of sellers concessions from 6% to 3% will do to the national real estate market.

Right now FHA is holding the real estate market up.  I would bet the majority of all loans being done right now are FHA loans.  And most of those FHA purchase loans are using 6% sellers concessions.  That is my professional guess.  You most likely have the exact numbers.

Most first time home buyers, and now many buyers that have re-entered the home buying market need that 6%.  What I think the administration is failing to realize is how much this will affect the housing recovery.

If you take all those home buyers out of the market that need the full 6% versus the 3% you are going to put the housing recovery into first gear.  Being in the trenchs in the metro Detroit real estate market I know for a fact that many of my homebuyers could not have bought a home without the full 6%.  In Motor City terms, Taking away the 6% is going to be like stepping on the brakes on the housing market.  A lot of buyers are going to be flying out of the car.

Now I admit people that don't have any money into the purchase of the home are more likely to go into foreclosure.  I myself feel that buyers should have money into the home purchase.  Many of my buyers are getting gifts or some help with the required down payment.  I also agree with you that we need FHA to be  financially stable.  But I question the timing and putting all of these changes in at one time.

I'm not going to argue with the current administration that the economy is on it way to recovery.  But I know we need more time for all the people that have lost their home to foreclosure to become buyers again.  Time and jobs are the only cure for the housing recovery.  We need three years to go by, so foreclosed home buyers can get another FHA loan.  So they have time to save for a down payment.  We need time.

BUT CHANGING THE CONCESSION RULES AT THIS POINT IS GOING TO HURT THE HOUSING RECOVERY.  IT MAY EVEN REVERSE THE RECOVERY. Watch out for the crash is my warning.  I bet fall off will be 20% or greater.  That will be a crash we can't afford!

I myself think the bigger issue is debt ratios.  I still believe many lenders are pushing the upper limits for debt ratios.  I think that is an area where you should be looking at.  Buyers still could buy with 6% concessions, but they could only buy a smaller house with lower debt ratios.    Should the debt ratios come down to 38 or 39%.   Debt ratios are another major key on keeping a home and I have seen a few homes that should not have been bought (in my opinion)

Just my thoughts from a guy in the trenches.